How do Branding Companies Generate Recurring Revenue? The model of recurring revenue is a guaranteed method of building long-lasting relationships with your clients and gaining their trust. It also guarantees a consistent and predictable flow of income for your business, even in difficult times.
An agency must plan its expenses if it uses the recurring revenue model. It also allows for the expansion and growth that is planned. In essence, a stable client base, as well as a steady stream of income at regular intervals, are two crucial factors: agencies need to spend less time and resources in acquiring new clients, which improves their value to investors and attracts more investment to help grow the business in the future and present. We’ll first look at what a regular revenue model is. In the next section, we’ll look at the different types of recurring revenue models and ways to use them to benefit your organization.
What is the Business Model of Recurring Revenue?
The business model based on recurring revenue is a revenue model in which vendors allow customers access to a product or service for a monthly or quarterly fee. It is usually each month, every quarter, or even yearly. Membership and subscription services are the results of this model.
8 Recurring Revenue Types Strategies That Work
There are a variety of business models that generate recurring revenue that you can utilize to ensure your source of income even in difficult times. Selecting the suitable model will make you stand apart from the abundance of business presentations on the web.
- Predetermined Service Charges for the course of a specific time
Complex Contracts – Types of Recurring Income Model
This type of recurring income model can be found in contracts. If you sign a complex contract, both you and your customer have a strong relationship until the contract period is over. If they intend to terminate before the end of the contract, they must pay a cancellation cost. Customers can continue using your service even after their contract ends by signing a rolling monthly contract with the exact cost for services.
Example What is an Elegant Theme is Utilizing This Kind of Model
One example of a company using this recurring revenue model could be Elegant Themes, a WordPress theme and plugin developer. They provide a single annual subscription plan that costs $89 per year. A single-year contract is signed to use their services for a predetermined amount.
It is possible to use a contract that is a “hard” contract when you’re an agency that can benefit from this kind of regular revenue model. Clients pay a predetermined price to use the services you offer for a predetermined duration, guaranteeing an ongoing commitment.
- Recurring Purchases to Perpetuate Use
Purchases recurring for use over time.
This kind of recurring revenue model is based on sunk money consumables. This means that the consumer buys a service or invests in a service and then must make regular purchases to get continuous use of the product or service.
Example of how Amazon Prime is Using This Model Model
How do Branding Companies Generate Recurring Revenue
Amazon Prime is an excellent illustration of this kind of recurring revenue model because it integrates subscriptions into its pay-per-product business model. This is done through in-app purchases and rentals. It is possible to make this model work for you by offering a one-time bundle or platform, like software.
To continue using it, your customers must make ongoing purchases, guaranteeing a constant flow of revenue and solid customers. The purchases could include exclusive, premium, or new features which weren’t included in the software at the date of the purchase.
- Automatic renewal of subscriptions
Automatic renewal of subscriptions
In this kind of model, recurring revenue, companies charge their customers on a regular basis until the client stops the service. If you want to implement this recurring revenue model for your company and clients, you could present your clients with an offer that provides more benefits over and above the standard package they are offered. It is possible to automatically renew their subscription to the program until they decide to cancel the membership. Watch our webinar on recurring revenue and auto-updating privacy policies.
Example of how Netflix is Utilizing This Kind of Model
How do Branding Companies Generate Recurring Revenue
Netflix is an excellent illustration of this model. The subscription will automatically renew until you choose to end your subscription to the service. The auto-renewal of subscriptions would build a stronger connection between your client and you, providing your agency with recurring revenue and better retention. If you are selling a SaaS product could be an ideal way to introduce this kind of recurring revenue model to your company.
- The Scheduled Billing based on the Usage of the Product
The Scheduled Billing is based on the Product Usage(Source Baremetrics)
Businesses that follow this regular revenue model invoice customers regularly depending on the use of a service or product. In the same way, establish metrics for measuring your service use, set rates for the time intervals and schedules, and then bill customers accordingly.
Example The way Digital Ocean is Using This Model? Model
An excellent example of a company that uses this method can be found in Digital Ocean. They offer their services and charge per hour of usage. The use is monitored and invoiced based on two particular metrics: the bandwidth and volume of data and the length of time that online machines(droplets) are in use throughout the month.
Kalungi is a B2B SaaS-based marketing agency that uses a similar pay-for-performance model. If this model suits your business, you could use the abovementioned strategy. However, if it needs to be more suitable for your services, avoid this recurring revenue model and select another one.
- Per-User Billing Model
Per-User Billing Model(Source: Microsoft 365)
The per-seat or per-user billing model is a recurring business model that allows businesses to bill customers according to the number of users using the product. As the number of customers increases, the costs rise and could be annual or monthly.
A few examples of companies that utilize this model include applications for team collaboration, such as Slack, and Microsoft 365, which has a per-seat cost of $69.99/month. It is possible to use this business model based on recurring revenue for your company when you decide to offer the SaaS product to your customers to collaborate with teams or other. Many digital marketing companies offer SaaS marketing.
Example of How Digital Agencies are Using This Kind of Model
How do Branding Companies Generate Recurring Revenue
A few examples include Single Grain, Refine Labs as well as Rocket. Try to create a SaaS product, such as email automation tools, and earn recurring revenues. Single Grain offers a SaaS known as Clickflow to aid busy content marketers and also earn in the form of recurring revenue.
- Multiple levels in the Pricing Structure
Multiple Levels of the pricing Structure
Multiple tiers within the pricing structure imply that pricing is based on the amount of usage. In this kind of recurring revenue model, the moment your client exceeds the maximum amount of consumption allowed in the initial tier, they can upgrade to the next level for more significant features, capabilities, and consumption quantities.
Example of How Roketto is using this type of model
Roketto is a digital marketing company that utilizes tiered billing to pay for services. Apart from Roketto, other SaaS marketing firms offer tiered billing as part of professional, essential, or enterprise-level plans.
- Combination of Recurring and one-time Billing Model
Hybrid Revenue Recurring Model
Certain companies use the hybrid billing model. It’s the case when two or more recurring revenue models are joined. Standard hybrid billing models that your company can use include: combining the recurring and one-time billing system such as Birchbox, OR using a monthly retainer such as Netflix and using it in conjunction with fixed-rate fees that get raised when an agency reaches specific objectives or meets KPIs, and also offering an additional benefit to customers.
Example of How Slack is Utilizing This Kind of Model
An excellent example of a business with a hybrid recurring income company model would be Slack. It utilizes a per-seat price model paired with a tiered billing system that includes features. Another illustration is Appcues. It utilizes a tiered billing model, a per-user billing model, and a feature-based plan.
If you run a business, consider which type of hybrid billing best fits the services you provide and take advantage of more than one business model recurring in revenue. Refine Labs charges $25K/month for the range of features it offers, yet it promises to accommodate any budget for advertising. The monthly cost is increased when clients have larger monthly budgets for advertising.
- A Lifetime of Free access to Basic Products or Services Plan
Some companies refer to this recurring revenue model as a freemium model. In this kind of business model, for recurring revenue, customers will have free access for life to the base service or product plan. However, they’ll have to upgrade to paid plans to get more advanced features.
Example: The Way MailChimp uses this type of model
How do Branding Companies Generate Recurring Revenue
MailChimp is an excellent example of a business using the Freemium Model. Suppose you have at most 2000 email addresses on your list. In that case, it allows users to send up to 12,000 emails per month and benefit from its Facebook and WordPress integrations, allowing you to expand your list of contacts under its freemium model.
If your email database is at least 2000 people and you are ready to change to the next plan at $10. Another excellent example is Buffer. It allows you to schedule 10 social media posts simultaneously and even more with the freemium account. And to give you more flexibility, opt for one of the premium plans.
The freemium model could work for your agency if you offer a SaaS such as MailChimp Buffer, MailChimp, or Later. After looking at the various types of recurring revenue models and models, such as SaaS models of recurring revenue, Let’s discuss the benefits of implementing a recurring revenue model for your company.
Benefits of having a recurring Revenue Business Model for Your Agency
There are many advantages to businesses that adopt the model of recurring revenue. A few of them are:
Client Retention: Using the recurring revenue model implies establishing a long-term and close relationship with your customers. Through, for instance, monthly retainers, you can make sure that your customers are receiving the services they want and stay with you for a more extended period. You gain their trust, and you can invest only part of the money in acquiring new customers.
You get them acquainted with your approach to work, and they know who they can trust to meet their expectations. So, you won’t lose clients due to one-time purchases. Steady Stream of Revenue Unlike a one-time transaction, the recurring revenue model assures predictable revenue at set intervals. This can help your organization in difficult times. You can budget for expenses and invest in expansion and growth.
Trust of the investor – A steady flow of income and a loyal customer base could draw investment from investors who can aid your company in expanding and increasing its growth. A recurring revenue model is crucial for the long-term growth plans of your company.
Ideas for Making The Recurring Recurring Business Model Work
We live in uncertain times, which has created an increasing need for companies to adopt the business model of recurring revenue. In this regard, We have some suggestions to assist you in putting this model for your organization.
Selling and distributing great content is a simple way for an agency to create a recurring revenue business model. It could take the form of an ebook that you would like to market on a topic your customers are interested in and would like to understand. Another option is to offer short online courses based on your knowledge and experience so that your customers can enroll and learn while progressing with you.
You can also design easily editable Canva templates for posts on social media platforms like Instagram and offer these templates to help your clients with their social media strategy. When you combine all three options, you can build an online membership site that is gated, meaning that users would pay a monthly recurring cost for access to the content you create for them. When selling this, ensure that you advertise the value customers won’t get elsewhere.
SaaS products are more costly to produce than content. Once they’re developed, they will be more lucrative in the long run. This is because they enable users to earn regular monthly income. To create a SaaS service, you should engage developers who know how to code or build an application. SaaS marketing services include MailChimp, Later, Buffer, Clickflow, Rytr, and ActiveCampaign.
If you’re an agency for web development and want to sell website maintenance services and develop monthly and annual multi-tiered price plans, decide on how often you’ll provide maintenance services for each. You could also resell hosting services or make a bundle of “hosting and maintenance” in exchange for a per-month cost.
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Selling products is a great idea to introduce the recurring revenue model within your business. A good illustration can be Design Pickle. They offer unlimited graphic designs and unlimited revisions and requests for $399 per month (Basic plan) or $995/per month (Pro plan).
Following a similar approach that you follow, you can create and sell plugins and themes as well. It is also possible to charge a monthly cost for the plugins that you select to market. It could be a take either or a deal. This will entice customers to buy your product. After looking at the many options and ways to create the recurring revenue model to work for your organization, let’s take a look at what experts from agencies can say about the model and how it can benefit their businesses.
Recurring Revenue Models as Utilized By Professionals
These are the guidelines that experts from agencies suggest when trying to implement the recurring revenue model in their businesses.
- The Subscription Model
Brian DeanBrian Dean, Founder of the Search Analytics Platform, The Search Analytics Platform is exploding Topics
Payments via mobile devices are getting more popular, and consumers prefer a simple, easy shopping experience. These changes lead to an increase in subscription-based services that consumers can easily set up and then forget about being assured that their products or services will be delivered each month. Include some crazy messages, well-written ads, and an amusing spokesperson, and you’ll have an enterprise that. The company keeps increasing and even tripling its earnings every year.
As a digital marketing professional, the subscription model provides the company and client with the most value. Users will discover it accessible and easy to use and take some of the confusion from the buying process. Customers are assured that they will receive their products in the same order every month, don’t need to worry about reorders, and will be able to pay
A predetermined flat fee that isn’t costly. On the other hand, for startups, the value lies in the capability to predict revenue through regular sales, which can be highly beneficial to the company’s valuation. This increases the value of the company’s product, making it more attractive to prospective buyers and investors, and, in some cases, it leads to valuations that can be as high as eight times that amount. More than the same amount as similar companies with low recurring revenue.”
- Productized Service
Samuel DarwinSamuel Darwin, President of LinkDoctor LLC. LinkDoctor LLC
“When we started, we were still determining what model would suit our organization. We eventually shifted to a “recurring revenue” model. What we’ve changed is that we are moving to the “Productised service” strategy. We have been able to deliver outstanding results and develop long-term relationships with our customers. Like every coin, it has two sides; the other side of this is that we’ve become lazy with sales. That is one of my lessons. We utilize a portion of both and prefer the recurring models, and they are providing us with excellent results.”
- Fix Monthly Retainer Fee
“As an agency, our recurring revenue model is built around an annual retainer fee fixed for our clients. The retainer fee could change the client’s needs and plan. As an agency that aims to transform organic search into an effective marketing channel, we focus on three primary areas: content writing performance, HR, and on-page optimization. Based on the range of services we offer, we modify our retainer fees in line with.”
- Selling SaaS
Julian GoldieJulian Goldie, CEO of Goldie Agency
The computer’s software is an application. Offering a subscription-based software service is different from selling physical items. Instead of selling something tangible, it’s the services that people use frequently. If you offer a product or service that people would like to access frequently, They will be inclined to purchase it.
A subscription as a service could aid your business in generating recurring revenue. A recurring revenue company that is also a SaaS business is likely to create software that users can use. Software services perform a specific role. I’m convinced they help people live more quickly and efficiently.”
The most important takeaway
A regular revenue model allows you to concentrate on expanding and growing your agency’s operations without stressing about acquiring new clients each time or having a sporadic source of revenue. It’s an excellent method to build strong relationships with your customers and loyalty and retention. As a domino effect, it will bring new customers to your company and vice versa.
For more suggestions and the most popular pricing models for agencies, visit our blog post about six pricing models for agencies that can increase profitability. You should research and learn from the multitude of agency and SaaS businesses to find the most efficient regular revenue model to run your business.
Frequently Answered Questions
Here are some frequently asked questions related to the article How do Branding Companies Generate Recurring Revenue:
Q1. How can you design a model for recurring revenue?
One of the best ways to create a recurring revenue model includes the following:
1. Create a Membership Program based on Your Services
2. Create Physical Product Subscriptions
3. Join as an Affiliate for SaaS products
4. Combining two models, the membership program and physical delivery of the product
5. Remainer or service plans
Q2. What are some examples from revenue model models?
Eight main kinds of recurring models can be used, and each is explained with an illustration. It is also possible to use a hybrid recurring revenue model by mixing two or more models.